Analysts Split on Advance Auto Parts as Hedge Funds Maintain Bullish Stance
Advance Auto Parts (NYSE:AAP), a leading automotive aftermarket retailer, continues to draw significant attention from institutional investors, with hedge funds positioning it as a top holding within the auto parts sector. The divergence in analyst outlooks, however, paints a complex picture for the stock's near-term trajectory.
In a recent move underscoring a longer-term bullish case, Aaron Reed of Northcoast Research upgraded his rating on AAP from Neutral to Buy on January 21. Reed set a price target of $55, implying a potential upside of over 14%. His optimism is rooted in expectations for robust demand trends materializing in 2026, driven by the aging U.S. vehicle fleet and the company's ongoing operational improvements.
This vote of confidence contrasts sharply with a more cautious stance from other quarters. TD Cowen analyst Max Rakhlenko substantially reduced his price target on AAP from $62 to $46 while reiterating a Hold rating. The adjustment was part of a broader reassessment of the hardlines retail segment, reflecting concerns over near-term macroeconomic pressures and competitive dynamics.
Further adding to the mixed signals, Evercore ISI's Greg Melich reaffirmed an In-Line rating for the stock in mid-December, though he modestly trimmed his target price from $58 to $56. Even at this revised level, Melich's target suggests a 16% upside from recent trading levels, highlighting the perceived value disconnect some analysts see.
Advance Auto Parts, with over 4,700 Advance and Carquest stores, serves a dual market of professional installers and do-it-yourself customers. Its product range spans batteries, braking systems, engine components, and exhaust systems, positioning it as a key player in the automotive maintenance ecosystem.
Market Voices: A Split Verdict
Michael Torres, Portfolio Manager at Horizon Capital: "The hedge fund interest is a tell. They're looking past the next quarter or two. The vehicle parc is older than ever, and replacement demand is inevitable. AAP's store network and brand recognition in the professional segment are durable assets being undervalued by the market."
Sarah Chen, Independent Retail Analyst: "I'm skeptical. The downgrades from firms like TD Cowen aren't happening in a vacuum. Inflation is pinching the DIY customer, and commercial sales face stiff competition. The '2026 story' feels like a justification to ignore present-day headwinds. This stock could tread water for a long time."
David Riggs, Small Business Owner (Auto Repair Shop): "As someone who buys from them weekly, their inventory consistency has improved. If that continues, the pros will stay loyal. The stock market might be overthinking this—basic cars need basic parts, recession or not."
Janet Fowler, Editor at Insider Monkey: "While AAP presents a compelling case within its sector, investors seeking exponential growth may look elsewhere. The AI revolution and shifting trade policies are creating more dynamic, albeit riskier, opportunities in the technology and industrial spaces."
Disclosure: This analysis is based on publicly available information and analyst reports. It is for informational purposes only and does not constitute investment advice.